PRE-APPROVAL A LA RAY

Loan Pre-Approval...According to Ray

Once you have a good idea as to what you’re looking for in your next home—and everyone more or less agrees—then it’s time to talk with a lender.

I know, I know, this is a lot less fun than going out and looking at properties. But here’s the thing: If we start looking at homes for sale in Northfield, Montpelier, Barre, wherever, and then you find out that we’re looking in the completely wrong price range, then we haven’t really made any progress. The goal of buying a house is buying a house. It’s important to keep that in mind.

Picking a Lender

You can work with any lender you want. I recommend the local lenders, just because they seem to be pretty easy to work with. Need one more signature? Just stop by Joanne’s office on the way to work. Have a question? Call Maryellen’s direct line. You get the idea. The rates and closing costs might vary a little from lender to lender, but they shouldn’t make a huge difference. The important part is that you work with someone you get along with, and someone who can make the loan happen.

Getting the Pre-Approval

After you’ve talked with a couple of different lenders, and know with whom you want to work, you’re going to want to get pre-approved for a loan. This is the part where the bank gives you a rough estimate as to how much they’re going to lend you. For the pre-approval, you’ll need your tax returns for two years, pay stubs, investment/bank statements, and any information relating to any debts you have. Sometimes you just need round numbers for the pre-approval, so just call the lender and find out.

Based on all the ratios lender use, as well as your credit score, you’ll get pre-approved for up to a certain loan amount. This is important. You won’t want to look at houses listed at $225,000 if you’re only pre-approved for a $200,000 loan. On the other hand, if you’re expecting to see features more common in a $450,000 home, it’ll help to know if that loan works for you.

By the way, just because a lender will lend you the money doesn’t necessarily mean you should take it. Look at the monthly payment (including property taxes and insurance), and think about whether you’re comfortable with it. Spoiler alert! You won’t be. It’s going to seem very high. Think about it some more…remember that you get a tax deduction for interest and property taxes.

Why It’s So Important

You’ll come skipping and dancing out of the lender’s office, gleefully waving your pre-approval letter in the area as you bound down the street. Metaphorically at least. Now you’re ready to start looking at property. Because now, when you find THE HOUSE, your offer will include a pre-approval letter. That makes sellers know that you’re a qualified, serious buyer. That strengthens your position. That makes you happy. We like happy.

Oh, one more thing about the pre-approval. Say you’re pre-approved for a loan of $275,000. Then, say you find a home for sale in Montpelier want to make an offer. Call the lender, and tell them what your offer is going to be. If you’re going to start negotiation at $260,000, then ask for a letter saying you’re pre-approved for $260,000. No need to tip your hand. The number on the letter can change, it just can’t go above that $275,000.

I’m always happy to answer questions and help people along the way. Think of me as your own personal real estate consultant. Just call or email.